The New Development Bank and the Asian Infrastructure Investment Bank: China's Ambiguous Approach to Global Financial Governance

TLDR

The creation of the New Development Bank and the Asian Infrastructure Investment Bank has attracted significant attention and controversy, reflecting China’s ambiguous approach to multilateral development finance shaped by its multiple identities and complex economic and political interests. This study investigates whether China’s involvement in both banks signals a new model of multilateral development finance and examines the forces shaping its policy choices, while contrasting the NDB and AIIB to highlight their major distinctions. The authors compare the NDB and AIIB, emphasizing key differences in their governance structures, membership criteria, and investment priorities. The analysis shows that China’s prominent role in both institutions indicates it is not pursuing a coherent new model but instead straddles different traditions in global financial governance.

Abstract

ABSTRACT The creation of the New Development Bank (NDB) and the Asian Infrastructure Investment Bank (AIIB) has generated a great deal of attention and controversy in the development community and beyond. Do these banks indicate that China is promoting a new model of multilateral development finance that undermines the existing system dating back to Bretton Woods? What are the forces shaping China's policy choices in this area? In contrast to the prevailing tendency to view these banks as part and parcel of the same challenge or opportunity for multilateral development financing, this article highlights major distinctions between the NDB and the AIIB. The fact that China is playing a prominent role in both the NDB and the AIIB suggests that China is not promoting a coherent new model of multilateral development financing, but is instead straddling different traditions in this realm of global financial governance. The ambiguity in China's approach to multilateral development finance is shaped by its multiple identities and complex economic and political interests.